2021 Housing Bubble Shades Of 2006 Housing Crisis?

Buyer Beware: Consider whether the real estate market bubble & crash of 2006 is about to happen again. That’s a possibility suggested by a chief economist at Toronto-based Rosenberg Research.

I still recall WSJ stories warning about how the hyper-inflated housing market in 2006, fueled by high yield/high risk mortgage loans, was “unsustainable.” My Chicago-area real estate broker at the time insisted the WSJ was “full of baloney … housing prices NEVER went down.” A month later, I saw my home value plunge over 50% in a prominent suburb and, frankly, it was many years before that FMV plunge got back to the inflated one; meanwhile, foreclosures in Cook County got so common the Chief Judge had to issue an order barring any mortgage company from collecting on “deficiency judgments”. LA and NY real estate values reportedly plunged even more than Chicago, but why quibble about then when the danger signs are present now?

“Record low interest rates, historically tight inventories & the COVID pandemic pulling forward the flight from city centers to the suburbs have sparked an unprecedented rise in US home prices.” Says David Rosenberg, “The ‘Black Swan’ is the inevitable collapse in US home prices – they are in the stratosphere benchmarked against all the fundamental factors that drive valuations.” Fox noted, “home prices soared by 16.6% year over year in May and are now 38.1% above their 2006 peak.” Has buyers’ willingness to plunk down ever-inflating prices also peaked? That’s the Q ... as it is in any Ponzi scheme.

Davd Soul